One paragraph of a 2001 arbitration settlement between Jamestown and the Kendall Club Police Benevolent Association sums up the entire debate over binding arbitration.
"Regarding the city's ability to pay, this panel is cognizant of city's declining tax base and decreases in population," wrote Thomas Rinaldo, a state arbitrator. "The panel is persuaded from the budgetary and fiscal information submitted that the city can manage their financial affairs so as to fund the salary increases awarded by this panel without unduly burdening their taxpayers. However, it may require an increase in taxes or an adjustment to the current level of services provided to the residents of the city."
In plain English, Rinaldo was saying the city hasn't reached its constitutional taxing limit, so it could afford to give police officers a pay raise.
Despite tough financial times for taxpayers statewide, arbitration panels have given out base salary increases of 3.6 percent a year from 2003 to 2007 and 3.3 percent from 2008 to 2012, according to a May study by the Empire Center for New York State Policy. Only four out of 136 arbitrations included a pay freeze in any year. Most employers sought cost savings on health insurance benefits, but less than half the arbitration awards included such changes, the study shows.
Arbitrators, much like Rinaldo, continue to reason that capacity to pay equals ability to pay - until now.
Gov. Andrew Cuomo and the state Legislature agree with mayors across the state that binding arbitration needs to change. Bills endorsed by Cuomo were approved by the Senate and Assembly on Friday - with both Assemblyman Andrew Goodell and state Sen. Catharine Young voting in favor - will force arbitration panels to consider a municipality's ability to pay as long as the municipality is deemed to be financially distressed. The bill states a municipality is financially distressed if it has a fund balance of less than 5 percent of its budget and a full value property tax rate greater than 75 percent of similar municipalities over five years. According to the Empire Center, 56 of 61 New York cities and nearly half of the villages with a police department and paid firefighters qualify as fiscally distressed.
Either ending binding arbitration or Cuomo's proposed 2 percent cap on binding arbitration awards would have been preferable solutions to the state's binding arbitration panel. Since those two options were not politically viable, especially downstate, the compromise that forces arbitrators to consider a municipality's ability to pay is a good first step. If arbitration panels are going to have the power to decide large chunks of a municipal budget, they should have to consider the consequences.